taxes types, methods & budgeting process section 2 MCQ Questions & Answers Detailed Explanation

Answer: (b)

Answer: (a)

There are certain capital receipts of the Central Government which do not create debt/liability on it. For example, when the government is selling its shares in PSUs it is capital receipts but is not creating debt on Govt. rather it is decreasing its assets. In the same way recovery of loans is capital receipt but does not create debt.

But, if the Govt. issues securities (treasury bills) then it will be debt creating capital receipts. And money received in Public Account are liabilities for Govt. of India and are considered as debt creating capital receipts.

Answer: (d)

Those receipts/expenditures of the government which changes the liability or the assets (physical or financial) of the Govt. comes under capital budget.

Expenditure on the acquisition of assets like roads or buildings come under capital expenditure.

Loans received increases the liability and loans given by govt. increases the assets of govt., hence the capital budget.

Answer: (d)

India's external debt includes the debt of the Central Government, State Governments, companies (ECB), NRI deposits, debt investments in India like FPIs purchasing bonds etc.

So, all the statements are true.

Answer: (c)

Answer: (b)

Indian Company means a company registered in India under The Company’s Act 2013. A Foreign Company means a company registered outside India.

A Domestic Company means an Indian Company or it can be a Foreign Company but it should have made arrangements for the declaration and payment of Dividends in India under the Income Tax Act 1961.

The 25.17% tax rate is applicable to Domestic Companies only.

Standard Tax Rate = 22%

Surcharge = 10% of 22% = 2.2%

Cess = 4% of (22% + 2.2%) = 0.968%

Effective Tax Rate = 22% + 2.2% + 0.968% = 25.168% = 25.17%

This rate of 25.17% is applicable to those companies which do not opt for various exemptions provided by the government (and hence there will be no MAT). Govt. gives a lot of tax exemptions because of which even if the official tax rate was 30% plus cess and surcharge, effectively the tax rate was 25-26% after claiming various exemptions.

But it was giving a wrong image to the outside world that India has such a high rate of 30%. So, govt. removed the exemptions and brought the official tax rate down to 25.17%.

To promote manufacturing, for new manufacturing firms set up after 1st October 2019 and commencing its operations before 31st March 2023, the Standard Corporate Income Tax is 15% (after Cess and Surcharge it will be 17.01%).